Egypt’s foreign reserves will decline from US$ 15.7 billion as reported in Last February to US$ 10.4 billion by next June, Major General Mahmoud Nasr, member at the ruling Supreme Council of Armed Forces and minister assistant for finance, announced.
Some bankers in Egypt said that this decline does not pose a threat on national economy but some other bankers affirmed that this retreat is bringing harms to national economy and that the benzene and diesel crisis is one of these initial harms.
Bassant Fahmy, banking expert and former consultant at Al Baraka Bank Egypt, said that military council’s expectation that foreign reserves will fall to US$ 10.4 billion by next June is groundless as tourism sector has began achieving good profit and Suez Canal revenues is increasing.
Falling to US$ 10 billion will not endanger national economy, as the foreign reserves are used in emergency, Fahmy noted. The problem is that the ruling military council did not take any steps to stop the sharp decline of foreign reserves. Besides, lax security, extreme high incomes of some officials, and unwise economic policy of some officials are the main problems facing Egyptian economy, Fahmy assured.
Fahmy added that foreign reserves decline and government debt increase are due to an unwise monetary policy that relies on consuming. Fahmy criticized government’s policy of expenditures in the last months as founding a cleaning authority and youth authority places an unnecessary burden on economy.
The banking expert recommended many solutions for economic recovery such as encouraging Egyptians living abroad to increase their US dollar transfers to Egypt by offering them high interest rate on deposits. The government shall stop backing Egyptian currency so stop the continuing decline in foreign reserves, Fahmy said.
Essam Shalaby, deputy chairman of Union National Bank, said that foreign reserves retreat to US$ 10.4 billion by next June cannot be false. If the ruling authority gave false information, it would be a “disaster”, Shalaby noted.
Foreign reserves decline in the last three months is because the country increased foreign borrowing as well as dollar resources retreat as foreign investments pulled out of Egypt.
Shalaby said that the level of foreign reserves poses a threat to the national economy and he attributed the benzene crisis to the lack of dollar liquidity. Shalaby recommended rationalizing government expenditures and supporting national production. Unwise policy is the reason behind the continuing decline in foreign reserves.
